Buy IPCA Labs; target of Rs 2300: Anand Rathi

Anand Rathi 's research report on IPCA Labs

Ipca’s Q1 FY21 result was boosted by strong momentum in its of business and supplies of Covid’19-related drugs (sales of `2.6-3bn). Sales grew 42.3% y/y to `15.3bn. Gross and EBITDA margins were a record 71.9%/38%, expanding 952/2037bps on one-time supplies of drugs with lofty margins and higher operating leverage. Adj. PAT grew a stunning 259% to `4.4bn. We increase our FY21e/22e/23e 28.6%/12.8%/14.1%.

Outlook

Strong traction in India formulations and exports and investment in raising API capacity and backward integration are likely to boost earnings 26.5% over FY20-23. We retain our Buy rating on the stock, with a higher target of `2,300.

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